College watch list a 'caution light' (updated)

Education Management

06/04/2015 20:11

(Alters number of institutions in lead, due to list changes. 
Gives new link to list. Provides names of previously redacted 
colleges in graf 13.) 
    By Liz Weston 
    LOS ANGELES, April 6 (Reuters) - Regulators recently made 
public a once secret watch list of around 550 colleges under 
scrutiny for financial irregularities. But inclusion on the list 
doesn't automatically mean the schools are about to fail, 
according to Department of Education regulators, college 
officials and even the reporter who triggered the release of the 
list with his Freedom of Information Act requests. 
    The list gained attention because of the Corinthian Colleges 
collapse last year. The education department placed Corinthian 
on the "heightened cash monitoring" watch list over concerns 
about the for-profit chain's practices and finances, and then 
last summer restricted its access to federal financial aid, 
including loans, grants and work study. Within weeks the already 
weakened chain ran short of money and agreed to sell or close 
most of its 107 campuses. 
    Some of the chain's 72,000 students are eligible for student 
loan forgiveness because their campuses closed. Those whose 
campuses were sold, however, are typically stuck with their debt 
even if their programs are no longer offered. 
    So the risks of attending a troubled school are significant. 
Until last week, though, the education department kept the list 
a secret, citing concerns that revealing a school's regulatory 
status could cause it "competitive injury," said Michael 
Stratford, a reporter with trade publication Inside Higher Ed 
who filed repeated FOIA requests over several months for the 
information to be made public.  
    In a blog post that accompanied the watch list's release, 
department Under Secretary Ted Mitchell said publicizing it was 
"another step to increase transparency and accountability," but 
said inclusion on the list "is not necessarily a red flag to 
students and taxpayers, but it can serve as a caution light."  
    Mitchell wrote, "It means we are watching these institutions 
more closely to ensure that institutions are using federal 
student aid in a way that is accountable to both students and 
taxpayers." 
    Stratford agreed that being on the list "is not an obvious 
indication of a problem" but is "certainly not a badge of 
honor."  
    "A college can land on this list for any number of reasons, 
ranging from the really mundane things like not filing paperwork 
with the department on time to serious things such as the 
department having concerns about the financial viability of the 
college on a short-term, immediate basis," Stratford said. 
    More than half of the institutions on the list (http://bit.ly/1yPAcWu) 
 are for-profit programs, including beauty, trade and healthcare 
training institutes. The list also includes small religious 
colleges and other private non-profit schools, a few public 
colleges and several foreign institutions, including The Hebrew 
University of Jerusalem and Middlesex University in London.  
    The majority of the institutions are subjected to the less 
stringent of two levels of monitoring. Instead of the federal 
government advancing them money for financial aid, which is 
normally the case, they must finance themselves and apply for 
reimbursement. Colleges subject to this "level 1" scrutiny 
include several Le Cordon Blue campuses, which are owned by 
Career Education Corp  CECO.O , and the Art Institutes, part of 
Education Management Corp  EDMC.PK , which has said inclusion on 
the list has not harmed students' ability to access financial 
aid or its financial standing. 
   But 69 institutions are subjected to the higher level of 
review, which requires they submit detailed documentation for 
each aid recipient. Education department employees must review 
and approve the documentation before the financial aid is 
reimbursed. 
    The education department initially redacted the names of 
several of the 69, citing ongoing investigations, before 
releasing the names Monday. Most of them are flagged as having 
"severe findings" after audits.   
    Six public institutions also are under increased review, 
including Roxbury Community College in Boston; Fort Berthold 
Community College in New Town, North Dakota; VEEB Nassau County 
School of Practical Nursing in Uniondale, New York; Taylor 
Technical Institute, Perry, Florida; Pike Lincoln Technical 
Center in Eolia, Missouri; and Eastern Oklahoma State College, a 
community college in Wilburton. 
    Although the list can give families a heads-up that a 
college is facing extra regulatory scrutiny, it's not really "a 
consumer information tool," Stratford cautioned. 
    "It might be a good jumping-off point for students and 
families that want to do more in-depth research," he said. 
 
 (Reporting by Liz Weston; Editing by Lauren Young and Ted 
Botha) 
 ((Ted.Botha@thomsonreuters.com;)(1 646 223 6928)) 
  
((Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance )) 
 
Keywords: COLUMN WESTON/COLLEGE